The main focus was however on Turkey after the United States and Ankara mutually scaled back visa services in a fresh sign of deteriorating relations between the NATO allies.

Dollar bonds fell across the curve while Turkey’s portion of the sovereign dollar bond index widened 9 bps to its highest premium over Treasuries since end-September. The lira shed 2 percent to the dollar.

Nomura economist Inan Demir noted that Turkey was already more vulnerable than other emerging markets to higher U.S. yields because of a big current account deficit and also high inflation, which reduced its real yield advantage.

Turkish one-year yields are now over 12 percent but core inflation is running at almost 11 percent. That contrasts with most big emerging economies which are seeing inflation fall.

“Turkey already stood apart from its peers .... If coupled with high political risks, its isolation would be further amplified,” Demir said. “We need to see either a lowering of the risk premium by defusing the tensions or an increase in the risk premium offered by the lira by raising interest rates.”

While authorities could be forced to raise rates if the lira selloff continues, “the bar for central bank action will be high,” Demir said, noting President Tayyip Erdogan’s strident opposition to higher interest rates.

The South African rand fell 0.6 percent, staying near six-month lows hit on Friday against the dollar, while the rouble slipped 0.3 percent to a 10-day low. Latin American and Asian currencies have also lost ground in recent days

HSBC called currencies the “weak link” of emerging markets.

“On the surface they’ve done well, but only having borrowed their entire lustre from a weakening dollar,” they told clients.

“That they haven’t been able to post trade-weighted gains amidst such a strong unicycle is a warning not to expect much alpha from this source on the secular horizon.”